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Goodwill is an intangible asset which occurs when a company acquires another company at higher price than its fair value (FV) (also known as market value/price). For example: ABC plc acquires XYZ ltd for £6m and the fair value of XYZ ltd is £5m, there is a premium of £1m (£6m (paid) - £5m (XYZ ltd FV) = £1m), this £1m will sit on the Statement of Financial Position as an Asset (Intangible) and will amortise (Depreciate) usually once a year.

Goodwill could also be internally generated by the company. For example, the brand of the company, reputation, customer service, patents etc.